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DONATELLO v. MCKENZIE

July 27, 1993

PETER DONATELLO, JR. et al., Plaintiffs,
v.
ANDREW McKENZIE, et al., Defendants. IVAN BORGOS, et al., Plaintiffs, v. PETER DONATELLO, JR., et al., Defendants.


McKENNA


The opinion of the court was delivered by: LAWRENCE M. MCKENNA

McKENNA, D.J.

 1.

 At issue in the above related actions is the validity of a trusteeship imposed on June 30, 1993 by the International Leather Goods, Plastics, Novelty and Service Workers Union (the "International") on the Four Joint Boards Council (which consists of a number of local unions) (the "Locals") and their health and welfare funds (the "Funds"). Ivan Borgos is the trustee; Peter Donatello, Jr. is the manager of the Locals; and Andrew McKenzie is the president of the International. The plaintiffs in 93 Civ. 4614 seek a preliminary injunction enforcing the trusteeship, the plaintiffs in 93 Civ. 4609 a preliminary injunction invalidating it.

 It is not disputed that the Locals owe the International approximately $ 60,000 in per capita payments. Failure to remit such payments on a current basis and to prepare or initiate a satisfactory plan for past due amounts is the principal stated reason for imposition of the trusteeship.

 A trusteeship may be imposed to the extent permitted by 29 U.S.C. § 462, which provides:

 
Trusteeships shall be established and administered by a labor organization over a subordinate body only in accordance with the constitution and bylaws of the organization which has assumed trusteeship over the subordinate body and for the purpose of correcting corruption or financial malpractice, assuring the performance of collective bargaining agreements or other duties of a bargaining representative, restoring democratic procedures, or otherwise carrying out the legitimate objects of such labor organization.

 29 U.S.C. § 462 (1988). The International's constitution requires the Locals to "promptly" pay per capita tax and assessments to the International. (Moss Decl. Ex. A at Art. II, § 10(a).) The constitution also provides that:

 
Whenever a Local Union, Joint Board or Council fails to abide by its obligations under the International Union's Constitution or fails to abide by its obligations pursuant to applicable law in discharging such obligations either to the International Union or its members, the International Union either through its General Executive Board or Board of Directors, may declare the existence of a Trusteeship over such Local Union, Joint Board or Council and such Trusteeship shall continue until the conditions and circumstances giving rise to such Trusteeship are corrected and remedied.

 (Id. at Art. XVII, § 1.)

 In Nat'l Ass'n of Letter Carriers v. Sombrotto, 449 F.2d 915 (2d Cir. 1971), the Court of Appeals set forth the standard to be applied to a challenge to the validity of a trusteeship.

 
The power of a local (or the Secretary of Labor) to contest the trusteeship in federal court, 29 U.S.C. 464(a), is subject to an eighteen month presumption of validity if the trusteeship has been established in accordance with the provisions of the parent's constitution and bylaws and has been authorized or ratified after a fair hearing, 29 U.S.C. § 464(c). This presumption can be overcome only by "clear and convincing proof that the trusteeship was not established or maintained in good faith for a purpose allowable under § 462." Congress contemplated that if the parent's constitution had an appropriate provision and this was complied with, the courts were to enter the picture to invalidate a trusteeship only if the local (or the Secretary) chose to contest the parent's decision and was able to overcome a rather stiff presumption of validity.

 Id. at 920-21 (footnote omitted).

 The Locals raise two issues in challenging the trusteeship. They argue, first, that per capita delinquencies are not "financial malpractice" within the meaning of 29 U.S.C. § 462. No case made known to the Court decides whether failure to make per capita payments on a timely basis is "financial malpractice." "Malpractice," however, has been generically defined as "an injurious, negligent, or improper practice." Webster's Third New International Dictionary 1368 (1986) (definition 2). The word does not imply corruption. *fn1" In discussing the proper purposes of trusteeships, the Senate Report notes that "it is not the intention of the committee to interfere in any way with the recognized authority and responsibility of a union to require compliance by subordinate organizations with all lawful and proper provisions of the union's constitution and bylaws." S. Rep. No. 187, 86th Cong., 1st Sess. (1959), reprinted in 1959 U.S.C.C.A.N. 2318, 2362. The trusteeship imposed here seeks to do that. The Court concludes that the trusteeship was validly imposed for a ...


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